In a quandary, sell my rental, or get a line of credit on my rental?

[Lars Henrik]

Hi All,

I own a rental townhome in San Jose, currently vacant as I was in the process of selling it. My tenants moved out today (6/15/2015). The market is super hot so I should get at least 20% over what i paid for it. My plan is to invest in better cash flowing properties with the proceeds, I was not cash flow positive on this house. (I live in an apt in SF right now).

I was going full speed ahead to sell it, but then I thought why not continue renting it out, and get a line of credit and invest the proceeds into cash flow positive investments?

The numbers:

- Owe 418k on the rental house (it used to be my primary home)

- Market value is probably 650k (my neighbor's house, exactly the same sold for close to that amount)

My thoughts are - getting a line of credit and using that to fund new investments will just lead to lower cash flow per month as I'd be paying interest on my line of credit and and any other loans.

I also saw this post and it seemed like more of a hassle, and higher interest on the rental equity line of credit versus a primary residence.

http://www.biggerpockets.com/forums/50/topics/1133...

Your thoughts? What other numbers/factors do you recommend I look into?

Thanks!

Lars

[Joseph Gozlan]

My thoughts are if you were not cashflowing before how will you handle the additional line of credit? you could find yourself underwater real fast...

Don't get me wrong, I don't believe in selling real estate properties if it could be avoided but I also don't believe in negative cashflow and over leveraging yourself...